Flush with mystery money, Kentucky nonprofit haunts Grimes’ Senate bid

Introduction

LOUISVILLE, Ky. — The most mysterious force in Kentucky’s pivotal U.S. Senate race is a ghost that dwells in a hole in a wall.

Hunt for the Kentucky Opportunity Coalition, and one finds no grassroots army, no canvassing operation, no office or headquarters at all — just a scuffed U.S. Postal Service box nestled inside a suburban shopping plaza about 10 miles from downtown Louisville.

About the only thing nearby that smacks of politics is an adjacent pop-up Halloween costume store. There, among monsters, ghouls and evil clowns, a vinyl President Barack Obama mask sells for $24.99 — the “scariest one of them all,” one shopper mused.

Corporeal or not, the Kentucky Opportunity Coalition has nevertheless capitalized on such anti-Obama sentiment, and the freedom to largely operate with anonymity, to haunt Democrat Alison Lundergan Grimes in her increasingly unlikely bid to unseat incumbent Senate Minority Leader Mitch McConnell, R-Ky.

About one in every seven of TV ads in Kentucky’s Senate race — about 12,000 of the more than 79,000 ads that have aired through Monday — has been sponsored by Kentucky Opportunity Coalition, which operates as a “social welfare” nonprofit organization that, by law, is prohibited from making the influencing of elections its primary purpose.

Only the McConnell and Grimes campaigns themselves have aired more TV ads during what’s become one of the nation’s most contentious — and most costly — electoral battles, according to a Center for Public Integrity review of data provided by Kantar Media/CMAG, an advertising tracking company.

No other group has had a larger footprint in Kentucky’s U.S. Senate race. In fact, the Kentucky Opportunity Coalition has aired about twice as many TV ads than the next most prolific player in the contest, a pro-Grimes super PAC called Senate Majority PAC, run by allies of Senate Majority Leader Harry Reid, D-Nev. And the Kentucky Opportunity Coalition has aired more spots than all other pro-McConnell groups combined.

Despite having effectively no physical presence, the Kentucky Opportunity Coalition now ranks among the largest social welfare nonprofits in Kentucky — bringing in more money, according to Internal Revenue Service records, than some of Kentucky’s more high-profile nonprofits, such as the Kentucky School Boards Association and the Kentucky Derby Festival, the group behind two weeks’ worth of events surrounding the Kentucky Derby.

Thank, in part, the loosened rules on corporate electioneering following the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision for Kentucky Opportunity Coalition’s unexpected rise. Certain types of donor-shielding nonprofit corporations may now raise unlimited funds to advocate for and against federal political candidates, not only in Kentucky, but in any race.

More acutely, though, thank a development akin to a corporate takeover for the group’s sudden prominence — the addition, last year, of a former top McConnell aide who previously worked in the White House with Republican strategist Karl Rove. Until then, the Kentucky Opportunity Coalition didn’t do much of anything.

That man: Scott Jennings.

McConnell’s mystery millions

Jennings served as the White House deputy political director in the George W. Bush administration and is a veteran of McConnell’s last two re-election campaigns.

Now a Louisville-based public relations consultant, Jennings served as a “senior communications advisor” to McConnell’s re-election campaign in 2008. Six years earlier, he worked as the McConnell campaign’s “political and communications director.” His skills have also been honed working for the GOP presidential campaigns of George W. Bush and Mitt Romney.

Jennings, a co-founder of the media relations firm RunSwitch PR, said he was hired by the Kentucky Opportunity Coalition’s board of directors to “help ensure the organization’s message is dispersed in an efficient and effective manner.”

He stressed to the Center for Public Integrity that the nonprofit “abides by all rules and regulations governing an organization of its kind.”

He continued: “The Kentucky Opportunity Coalition seeks to bring about long-term positive change with fewer additional regulatory burdens and taxes. Its activities are all geared toward that mission.”

With Jennings’ assistance, the group, he said, has spent $14 million since the beginning of 2013 — nearly as much money as Grimes has raised — though Jennings is quick to assert that “much of the advertising was of an issue nature and has no connection to any election.”

But records show the group has reported more than $7.1 million to the FEC for expenditures that “expressly advocate” for election of McConnell or defeat of Grimes.

Issue ads that praise or criticize a politician but fall short of overtly urging people to vote for or against them do not generally need to be reported to the FEC.

Policy of non-disclosure

The Kentucky Opportunity Coalition appears well aware that its potential donors may want to contribute for political reasons.

For example, its website for months promoted the fact that donations to the Kentucky Opportunity Coalition did not count against the $123,000 aggregate limit on federal political contributions — a limit that the U.S. Supreme Court struck down as unconstitutional in April.

Furthermore, every one of the 12,000-plus TV ads aired by the Kentucky Opportunity Coalition mentions either McConnell or Grimes, as does every video on the group’s YouTube page.

Many of these ads have praised McConnell, a five-term incumbent, for being “Kentucky coal’s chief proponent in our nation’s capital” and for “fighting to protect Kentucky jobs from Obama’s war on coal.”

Others have castigated Grimes, Kentucky’s secretary of State and daughter of former Kentucky Democratic Party chairman Jerry Lundergan, as “a liberal who is wrong for Kentucky” and a “rubber stamp” for Obama’s political agenda.

Overall, about 53 percent of the Kentucky Opportunity Coalition’s TV ads have praised McConnell while the rest have attacked Grimes, according to Kantar Media/CMAG.

Jennings told the Center for Public Integrity that these ads have had a “tremendous impact shaping the public policy environment” and that his group was “grateful” to have had “the resources to educate Kentuckians on a range of issues.”

He declined to say who was bankrolling this advertising spree. The Kentucky Opportunity Coalition’s policy is to “not provide the names of its donors to the general public,” its website states.

Center for Public Integrity analysis of Kantar Media/CMAG estimates of ads aired from Jan. 1, 2013, through Oct. 27, 2014. More here.

Campaign finance reformers say the Kentucky Opportunity Coalition is the epitome of “dark money” nonprofit groups that have little or nothing to do with promoting social welfare, as their IRS designation would suggest.

“This group for all practical purposes is simply an arm of Sen. McConnell’s campaign,” said Fred Wertheimer, the president of the Washington, D.C.-based advocacy group Democracy 21.

“This group exists to allow donors to give secret money to benefit Sen. McConnell’s campaign without the public knowing who these people are,” he added.

The FEC tried in August to compel Kentucky Opportunity Coalition to release more information about its donors when filing mandatory expenditure reports.

The group, in response, effectively told the government’s top election regulator to take a hike.

“Kentucky Opportunity Coalition understands the applicable reporting regulations,” group treasurer Caleb Crosby wrote. “The omission of contributor information on future reports should not be assumed to be an oversight.”

The FEC has held that social welfare nonprofits like the Kentucky Opportunity Coalition, which are organized under Sec. 501(c)(4) of the tax code, need only disclose the names of donors who give with the stated intent of “furthering” a specific ad or expenditure.

Notably, Crosby also serves as the treasurer for a number of other politically active groups, including American Crossroads and Crossroads GPS, the super PAC and nonprofit co-founded by GOP strategist Rove after the Citizens United decision.

The Citizens United ruling loosened campaign finance restrictions on corporations, including certain classes of nonprofits, which previously could not call directly for the election or defeat of federal politicians. They may now also raise unlimited amounts of money to fund such overt political messages.

Both Crosby and Jennings are also involved with a pro-McConnell super PAC known as Kentuckians for Strong Leadership, which raised $7.5 million between its formation in March 2013 and Oct. 15, 2014, according to campaign finance filings. Super PACs, unlike politically active nonprofits, must disclose their donors to the FEC in regular filings.

Many of the donors to Kentuckians for Strong Leadership have also donated to American Crossroads, including investor John W. Childs, a pioneer of the leveraged buyout, and Joe Craft, the president and chief executive officer of Alliance Resource Partners, a Tulsa-based coal giant.

Neither Childs nor Craft responded to requests for comment about whether they donated money to the Kentucky Opportunity Coalition.

‘They understand the game’

The Kentucky Opportunity Coalition has earned accolades from some local Republicans for its increased profile and involvement in Kentucky’s white-hot U.S. Senate race.

“They understand the game that has to be played in order to win,” said Nathan Haney, the chairman of the Louisville-based Jefferson County Republican Party. “And they’ve done a great job.”

Haney added that he had “no idea” where the Kentucky Opportunity Coalition was getting its money, but, he continued, “I’m assuming that they have a nationwide network because they are all very well-connected people.”

For its part, the McConnell campaign repeatedly dodged opportunities to discuss the Kentucky Opportunity Coalition.

At one campaign event in the northern Kentucky city of Hebron, McConnell himself was whisked away by staffers when this reporter introduced himself. And McConnell campaign spokeswoman Allison Moore did not respond to multiple requests for comment for this story.

Only after the mid-October debate between McConnell and Grimes in Lexington did McConnell campaign senior adviser Josh Holmes offer a curt response about the role of the Kentucky Opportunity Coalition in the race.

When asked by the Center for Public Integrity how the senator would be faring without the group’s ad blitz, Holmes said, “We’d be winning just like we are right now.”

Most recent polls have shown McConnell with a narrow lead.

McConnell has held a wider lead in the fundraising race: Through the end of September, his campaign had raised nearly twice as much as that of Grimes — $29 million versus $16 million.

Despite these financial disadvantages, Grimes has kept the contest fairly close.

Meteoric rise from humble beginnings

When it was launched in 2008, the Kentucky Opportunity Coalition offered no indication it would morph into one of the most prominent players in the fight for Republican control of the U.S. Senate.

When it applied for tax-exempt status as a social welfare nonprofit, the group told the IRS that it did not have any plans to spend any money “attempting to influence” the election of any political candidates.

It added that it would be “operated exclusively for public and social welfare purposes.”

And it further stated that it hoped to raise nearly $2 million during its first few years of existence from “individuals and corporations.”

Large donors would receive “invitations to policy conferences, dinners and premier events and “preferred seating and reception access” at Kentucky Opportunity Coalition events.

That funding, however, never materialized.

Between its formation in 2008 and the end of 2012, the Kentucky Opportunity Coalition never reported more than $50,000 in annual receipts, according to tax records. Press releases show it briefly advocated against a prevailing wage for education projects in 2009 before falling off the radar.

“The organization really did not have a tremendous amount of legs in its early years,” said David Mast, a lobbyist who served on its board of directors when it first launched.

But its current officers aren’t eager to talk about the group’s sudden rise.

Mum’s the word

Three Republican women — Kristen Webb, Bridget Bush and Karen Sellers — compose the Kentucky Opportunity Coalition’s current board of directors.

All have been involved with the organization since its founding, according to records.

Webb, the group’s chairwoman, is a Louisville-based attorney who previously worked in state government.

During the 2000s, she worked for Kentucky’s Finance and Administration Cabinet, which is the primary support agency for state government. She also served on Kentucky’s Registry of Election Finance, the state’s election and campaign finance regulator.

Bush, too, is a Louisville-based attorney.

In 2012, Bush was the lead counsel associated with the amicus brief of Sen. Rand Paul, R-Ky., in the legal fight over the constitutionality of the individual mandate in Obama’s health care reform law.

She was a founding member of the Louisville lawyer’s chapter of the Federalist Society, of which her husband, attorney John K. Bush, is the president. Her favorite books, according to her profile on a blogging website, include the Bible and Ayn Rand’s “Atlas Shrugged.”

Sellers, meanwhile, is the assistant to the president and CEO of the Highlands Regional Medical Center in Prestonsburg, in eastern Kentucky. She also chairs the board of directors of the Big Sandy Technical and Community College in Prestonsburg.

None responded to requests for comment. After phone calls and emails went unanswered, the Center for Public Integrity also attempted to contact Webb and Bush at their homes in Louisville.

John Bush, returning from walking the family’s dogs, said that his wife was “unavailable.”

No one answered the door at Webb’s stately, two-story brick home — a handsome structure that Jefferson County values at $767,500.

Jennings, the public relations consultant who serves as the Kentucky Opportunity Coalition’s spokesman, declined to comment on their behalf.

“I believe you have been trying to contact our board members,” he wrote in an email to the Center for Public Integrity. “I will be the only person commenting for the group.”

Up for sale?

On the campaign trail, Grimes has slammed McConnell as “Mr. Citizens United” and has criticized the “millionaires and billionaires” who are trying to help “buy Mitch McConnell’s way back to Washington.”

On a rainy Tuesday afternoon in the northern Kentucky city of Florence in mid-October, Grimes reminded her supporters that the “hearts and minds of Kentuckians” cannot be bought — even if the airwaves can.

McConnell and his allies have aired nearly three TV ads for every two from Grimes and her allies over the course of the campaign, according to a Center for Public Integrity analysis of data provided by Kantar Media/CMAG covering spending through Oct. 27, though in recent weeks that gap has narrowed.

Since the start of September, McConnell and his supporters have aired about 20,800 ads compared to the approximately 17,400 aired by Grimes and groups backing her. That’s about one TV ad every four minutes for Team Mitch versus about one every five minutes for Team Alison.

Super PACs have aided both candidates, but Grimes has less dark money support than McConnell.

Liberal-aligned nonprofits such as the Vote Vets Action Fund and Patriot Majority USA have made modest ad buys on Grimes’ behalf, while the U.S. Chamber of Commerce and Crossroads GPS have both joined the Kentucky Opportunity Coalition on the air in support of McConnell’s re-election bid.

When asked by the Center for Public Integrity about the Kentucky Opportunity Coalition, Grimes remarked that the group’s initials are just “one letter shy of Koch brothers” — a swipe at conservative billionaires Charles and David Koch, whose political network has spent millions of dollars aiding GOP politicians across the country this year.

In the home stretch of the campaign, she’s resolute in the face of whatever dark money the Kentucky Opportunity Coalition spends against her.

“This election won’t be bought,” Grimes said. “Our democracy isn’t up for sale.”